3 reasons why this rally could reach new all-time highs

From November to December 2017, the price of Bitcoin (BTC) recorded a parabolic uptrend to a new all-time high of $ 20,000.

There are three reasons Bitcoin could show a similar trend in the coming months. First, the post-halving cycle is coming into effect. Second, The Relative Strength Index (RSI) shows room for further recovery. In third place, the rally did not overheat, at least in the derivatives market.

The long-term RSI shows that Bitcoin is not overbought

Plan B, the creator of the Stock to Flow (S2F) indicator, shared a long-term RSI chart of Bitcoin. The indicator, which measures whether an asset is overbought or oversold, it shows that BTC is still at a neutral level.

Although Bitcoin went from $ 10,500 to $ 14,600 in one month, the RSI shows that there is room for further benefits.

For example, in December 2017, Bitcoin’s RSI surpassed 95 points. When the RSI exceeds 75 points, traders begin to consider that the asset is overbought. Currently, BTC’s long-term RSI shows that it is below 70 points.

The post halving cycle materializes like the past

In 2017, one of the main narratives about the Bitcoin boom was its halving in 2016. A halving of the block reward, which occurs approximately every four years causes the rate at which miners produce BTC to be halved.

The slower production of Bitcoin leads to an overall decline in BTC inflows on exchanges, causing supply to drop.

The last took place in May 2020and in 2017 Bitcoin began to recover months after the halving was activated. Bitcoin’s ongoing rally is in line with its previous macro rallies.

It is not a heated rally, there are fewer sellers on the spot market

In the past five days, Bitcoin’s funding rate remained negative on major exchanges, specifically on Binance Futures. This shows that most of the futures market has been BTC short.

A rally is considered to be overheated when the futures funding rate starts to rise above the average rate, which is 0.01%.. In recent weeks, BTC’s funding rate has fluctuated between -0.01% and 0.01%, which shows a fairly neutral derivatives market.

In addition to the uncrowded futures market, there are also fewer sellers on the spot market. Second TensorCharts, there are some sell orders at $ 15,000, but there are no major sellers at that level and beyond.

Since there is little resistance between $ 15,000 and $ 20,000, This increases the likelihood of reaching a new record in the coming months.

If you follow the same post halving cycle as in 2017, therefore Bitcoin would theoretically peak in the second quarter of 2021. If it is the case, there is a chance that BTC will far exceed $ 20,000.

The ongoing rally represents immensely strong momentum for Bitcoin because the miners started selling BTC. This shows that the market is absorbing the selling pressure of the miners.

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